The Limitations and Possibilities of ESG as the Multifaceted Phenomenon

Environmental, social, and governance (ESG) considerations have become a key aspect of global investment and corporate governance. A substantial amount of capital is allocated worldwide with ESG considerations in mind. While the rules for ESG continue to evolve, their precise legal and governance implications remain ambiguous. Scholars debate whether ESG can prompt a shift in the corporate focus from shareholder wealth to broader stakeholder interests. Drawing on Japan’s experience, this study posits that ESG, when combined with specific legal frameworks such as environmental and labour laws, can influence the way companies are managed by influencing the perception of executives of ESG-related risks. The findings contribute to the ongoing discourse on ESG’s role in corporate governance and its potential to reshape managerial decision-making. Keywords: ESG; company law; corporate governance; investor engagement; sustainability disclosure; shareholder value.